Coronavirus Relief Bill – Effects on the Employee Retention Credit (ERC) and the Paid Sick Leave and Paid Family Medical Leave Provisions

There are several things that you need to be aware of with the new Coronavirus Relief Bill.  The bill extends and expands both the ERC and the paid leave credit provisions that were originally part of the CARES Act.

The ERC, which is a refundable tax credit available for qualified wages paid by an eligible employer whose operations meet certain requirements, is changed under the bill as follows:

  • Employers who received a PPP loan can receive the credit if qualified wages were not paid from the proceeds of a forgiven PPP loan (this is a retroactive change).
  • The ERC changes will apply from January 1 to June 30, 2021.
  • The credit rate is increased from 50% to 70% of qualified wages per quarter (this was previously per year).
  • The gross receipts eligibility threshold for employers is reduced from a 50% decline to a 20% decline in gross receipts for the same calendar quarter in 2019.
  • If the business was not in existence in 2019, or if prior year gross receipts information is not available, the prior quarter gross receipts can be used to determine eligibility.
  • Employers with 500 or fewer employees qualify (increased from 100).
  • The credit is available to certain governmental entities.
  • The bill includes other clarifications regarding the determination of gross receipts and advance payments.

The paid sick and paid family leave credits is changed as follows:

  • Those employers who voluntarily provide paid sick leave and paid family leave under the Families First Coronavirus Response Act can continue to get a federal tax credit for leave through March 31, 2021 (formerly December 31, 2020).
  • No additional leave hours have been added to the originally stated leave limits. 

The Anderson ZurMuehlen Accounting Solutions Team is available for any questions you may have regarding the effects you may encounter from the Coronavirus Relief Bill. Please contact us with any questions.

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